You should go for mutual fund redemption process only when you have achieved your investment objective or there is a drastic change in the portfolio. In this article you would know how to redeem mutual funds online and offline.
Mutual Fund Redemption
Redeeming or selling your mutual fund units provides an exit route from the investment. It gives you the actual, present value of the investment undertaken in terms of monetary returns.
You may have your own reasons to redeem your mutual fund investment. But you should not redeem until and unless you have either reached your goal amount or it is absolutely necessary.
There are certain guidelines that can help you make a better decision while thinking of redeeming your mutual fund investment. Let’s help you understand how to redeem or withdraw a mutual fund investment in India.
When to Exit or Redeem Mutual Funds Units in India?
1. If the Fund Fails to Fulfill Objectives
You invest in a mutual fund for achieving certain financial goals. The investment happens when the scheme objectives align with your financial goal.
In normal circumstances, it does not happen. But in case, if you find that the fund allocation differs from the investment objectives, which has the potential to negatively impact the results, then you can think of redeeming.
You can think of redeeming if the long term prospect seems negative or the mutual fund scheme is continuously underperforming for two or more years.
2. When the Market is at High
Ideally, you should think of redeeming only when the investment objective is fulfilled, irrespective of the market condition.
It is best when both happen simultaneously, i.e. the objective gets fulfilled and at the same time the markets are at a high.
However, you should resist the impulse of booking profits solely because the markets are at their high. When you have shown faith in your fund manager while investing you should also trust in his abilities in all market conditions.
3. When the Scheme is Under-Performing
Underperformance should not be the sole reason for redeeming mutual fund investment. You need to check the exact reason for underperformance, whether it is due to market fluctuations and macroeconomic factors or for other reasons like
- A drastic change in portfolio mix
- Change in the fund manager
- Change in the investment strategy
- A downgrade of accredited fund ratings
If the underperformance is due to other factors, then you can think of redeeming your mutual fund investments.
4. Unexpected Financial Crises
There can be sudden and unexpected financial crises in life. You should always have an emergency fund covering such situations.
You should think of redeeming units only in case of a dire emergency or when you have exhausted all the resources to meet the emergency funding needs.
How to Redeem Mutual Fund Units?
In order to redeem mutual fund investment, you need to generate a “Redemption Request”. The request can be online or by filling a redemption request form specifying the number of units to redeem or the amount to redeem and submit it offline.
Online
- Through AMC Website
- Demat Account
- Mutual Fund Investment Portal
- Registrar and Transfer Agent Website
Offline
- Through AMC Website
- Mutual Fund Agent/ Distributor
- Registrar and Transfer Agent Office
The process can take up to 5 days for getting the amount credited into your bank account. This will depend on how you are applying for redemption.
To get hassle-free, faster redemption processing you should redeem online.
1. Redeem Mutual Fund Through Asset Management Company (AMC)
In case you have invested in the mutual fund directly from the AMC, then you can approach the concerned AMC directly by submitting redemption request online or by visiting their local office.
The redemption may take a day or two and the redemption amount will be directly credited to your specified bank account via NEFT or you may receive the cheque at your postal address.
2. Redeem Mutual Fund Through Demat Account
If you have used your demat account for investing in the mutual fund, then you can initiate the redemption from your demat account itself. Just select the redemption option and submit the request form.
The money will get credited via NEFT or IMPS to the bank account linked with your trading account.
3. Redeem Mutual Fund Through Online Mutual Fund Investment Portal
If you have invested through an online mutual fund investment website, then you simply have to log-in to your account. Select the fund, indicate the number of units to redeem and click the redemption option to submit the redemption request online.
The online platform will further process the redemption request and the money will automatically get credited in your bank account.
4. Redeem Mutual Fund Through Registrar and Transfer Agency
If you have your folio number or have invested through a registrar like Karvy and CAMS then you can redeem through them.
For redeeming online you need to log into your account and opt for redemption by selecting the redemption option.
Otherwise, you can use an offline mode, where you need to download the redemption request form and submit at the nearest office.
5. Redeem Mutual Fund Offline through Agent
This is a bit old fashioned, time-consuming, lengthy way to redeem. The whole process requires a lot of following up with your agent.
The process involves calling your mutual fund agent or distributor and submitting the redemption request form physically. Later, the agent completes all the necessary formalities to redeem the mutual fund investment.
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How to Withdraw or Redeem Mutual Fund Investments Online with Scripbox?
If you have invested through Scripbox, then you can redeem your mutual fund investment in a hassle-free way by using your account. Scripbox provides a flexible option to redeem instantly or schedule a redemption for a later date.
Step by step process for both the options is as under.
1. Redeem Instantly
- Log in to your Scripbox account
- Click on Invest More
- Select the category from which you wish to withdraw the money
- Click on withdraw
- Click on “continue with the same Bank”
- Select the appropriate answer to the question asked by the system
- Select on “Right now” if you need the amount immediately
- Enter the amount (Click on “Withdraw All” if you need the entire amount)
- Select the fund and confirm the withdrawal amount
- The system will recommend you to place a “Tax Optimised” withdrawal – this is applicable only for the Long Term Wealth
- Click on “continue with Rs. xxx”
- Click on confirm
- Note: The fund withdrawal Cut-off timing at Scripbox is 12 noon
2. Schedule Mutual Fund Redemption for a Later Date
- Log in to your Scripbox account
- Click on Invest More
- Select the category from which you wish to withdraw the money
- Click on withdraw
- Click on “continue with the same Bank”
- Select the appropriate answer to the question asked by the system
- Click on “Schedule for a later date”
- Select the date & click on next
- Enter the amount (Click on “Withdraw All” if you need the entire amount)
- Select the fund and confirm the withdrawal amount
- Click on “continue with Rs. xxx”
- Click on confirm
Things to Consider Before Redeeming Mutual Funds
The following are the things to consider before redeeming mutual fund units:
- Applicable NAV: The NAV of the mutual fund changes on a daily basis. To redeem at the day’s NAV, you must submit your redemption request before 3 PM. For all redemption requests after 3 PM, the next day’s NAV will be applicable.
Note: The fund withdrawal Cut-off timing at Scripbox is 12 noon - Lock-In Period: You can redeem open-ended schemes at any time. However, ELSS schemes have a lock-in period. Thus, they can be redeemed only after the three-year lock in period.
- Charges on Redemption: Redeeming mutual fund units will attract certain charges. For example, exit load, expense ratio, and securities transaction tax (STT). To benefit from maximum growth, you need to ensure you are paying minimum charges. Thus, before redeeming your mutual fund units, understand the charges.
- Bank Account: While redeeming mutual funds, you need to ensure that the bank account that you used for purchase is active. The proceeds from redemption will be deposited into the same account. In case the account is inactive, you must submit a cancelled cheque or passbook for the new bank account. Along with these, you might have to submit a declaration from the bank with the manager’s signature.
Tax on Mutual Fund Redemptions
Once you withdraw your mutual funds you will have to pay an exit load and the income tax. The income tax depends on the type of fund and the duration of holding the funds. If you withdraw equity mutual funds before 12 months then STCG will be applicable at 15% + cess + surcharge. Or else LTCG at 10% + cess + surcharge. If you withdraw debt mutual funds before 36 months then LTCG will be applicable at the rate of 20% + cess + surcharge. The STCG is taxable at the slab rate applicable to the investor.
Conclusion
Both investment and exit are important decisions impacting your life goals and financial condition and thus it requires proper evaluation. You should go for redemption only when you have achieved your investment objective or there is a drastic change in the portfolio. To know more about the advantages of mutual funds, click here. In case of any doubts or questions, please feel free to ask in the comments section below, we will try and respond as early as possible.
Check Out How to Select Mutual Funds
Frequently Asked Questions
One can redeem from mutual funds anytime as long as it is an open-ended mutual fund. However, it is always recommended going for the redemption process when you have achieved your financial goal or a drastic change in the portfolio. You can redeem from your mutual funds either online or offline mode. The redemption can be placed on any business day. Investors can redeem their funds directly through the AMC website or through the distributor they have invested in.
The redemption time varies based on the fund type. For example, a liquid mutual fund can be redeemed instantly or can take up to 1 day. While for a debt fund, the redemption may take between 1-2 days. On the other hand, for equity mutual funds, it may take up to 4-5 days for redeeming the funds.
When redeeming mutual fund units, you will be charged expense ratio, securities transaction tax, and exit load if applicable.
After raising the redemption request, you will receive the money in your registered bank account. In case the bank account is inactive, you will have to provide a cancelled cheque or a passbook copy for the new bank account.
